CARES Act Mid-Sized Business Loans: The Union Neutrality Trade-Off
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While the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) provides important assistance to businesses throughout the United States, mostly through essential loan opportunities backed by government dollars, it carries a serious drawback for non-union mid-sized businesses. The CARES Act specifically addresses the development of a loan program for mid-sized businesses. However, in order to receive these loan opportunities developed under the CARES Act, mid-sized businesses are required to “remain neutral” regarding any union organizing during the term of the loan. This requirement makes non-union, mid-sized employers an open target for union organizing efforts, and so employers must use this time to create a program to proactively legally reduce the risk to union organizing by communicating to their employees why unions are not in the best interest for themselves, their careers, or their families.
CARES Act Provisions
Section 4003(D) of the CARES Act states that the Secretary of the Treasury “shall endeavor to seek the implementation of a program or facility” for lenders to make direct loans to eligible businesses, including mid-sized businesses. The CARES Act defines a “mid-sized business” as any business with between 500 and 10,000 employees. The Department of Treasury will release information to implement this mid-sized business loan program.
Along with certain promises regarding the use of the loan funds, the CARES Act requires mid-sized business to make a “good-faith certification” that it will “remain neutral in any organizing effort for the term of the loan.” The term “remain neutral” is not defined in the CARES Act, and no guidance has been issued by the Department of Treasury to clarify this phrase. However, what is certain is that the CARES Act provides necessary financial relief at the expense of a mid-sized employer’s waiver of free speech rights otherwise protected under Section 8(c) of the National Labor Relations Act (“NLRA”).
In general, employers and unions have certain rights under Section 8(c) of the NLRA. These rights include the right to express “any views, argument, or opinion,” provided there is no threat of reprisal or force or promise of a benefit. Generally, this means that both unions and employers can share facts, opinions, and experiences about unions with its employees. This protection allows employers to prevent misinformation and share facts that unions often downplay, including the costs to employees, the impact of strikes, and the loss of a direct relationship with their employer. The purpose of the Section 8(c) protections is to allow employees to make informed decisions regarding union organization.
Possible Meanings of “Remain Neutral”
In exchange for the necessary monetary relief it provides, the CARES Act demands the waiver of some or all of the employer’s Section 8(c) rights of free speech. Although the definition of “remain neutral” is not clearly defined, typical neutrality agreements between unions and employers commonly contain:
- “gag rules” prohibiting employers from negatively commenting on the union,
- card checks automatically recognizing union representation once a threshold of union authorization cards are collected, and
- requirements that the employer provide personal information about employees to the union. It is unclear whether this requirement to “remain neutral” prevents employee groups from arising to fight against union organizing efforts.
Neutrality agreements sometimes have included provisions that provide some limited protection for the employer, including allowing the employer to explain legal rights, the secret ballot process, collective bargaining, and the positive benefits employees received without a union. The CARES Act gives the Secretary of the Treasury authority to promulgate regulations and guidance regarding the CARES Act’s provisions, and so hopefully in the coming days guidance will be released regarding the extent of “neutrality” required for mid-sized businesses to receive the loan opportunities provided under the CARES Act.
Not only is it unclear what “remain neutral” means under the CARES Act, it is also not clear what adjudicatory body will be responsible for interpreting and enforcing these requirements. Generally, the National Labor Relations Board (“NLRB”) is responsible for enforcing and interpreting the NLRA and other labor laws, and for determining whether unfair labor practices occur. Currently, it is an open question whether the NLRB will be responsible for applying these labor-related provisions under the CARES Act, or if the Court system will be the proper body for adjudicating these issues. Until the Secretary of Treasury provides more clarification on these practical issues within the CARES Act, these provisions create more questions than answers.
These labor-related CARES Act provisions demonstrate that unions will likely increase their organizing efforts. As such, prudent employers who may be affected by the Act should be proactive:
- Audit employee relation programs, work rules, and compensation,
- Implement a communication plan that meets the legal requirements of the NLRA, and
- Devise a union vulnerability action plan under attorney-client privilege.
The importance of acting expeditiously cannot be overstated.